Raymond Company Estimates That an Investment Of $\$ 800,000$ Would Be Necessary to Produce and Sell 40,000 Units of Be

Multiple Choice

Raymond Company estimates that an investment of $\$ 800,000$ would be necessary to produce and sell 40,000 units of Product S each year. Costs associated with the new product would be:
$\begin{array}{|l|r|}\hline \text { Variable Costs (per unit) : } & \\\hline \text { Materials, Labour, and Manufacturing Overhead } & \$ 30 \\\hline \text { Selling and Administrative } & \$ 5 \\\hline \text { Fixed Cost per Year: } & \\\hline \text { Manufacturing Overhead } & \$ 300,000 \\\hline \text { Selling and Administrative } & \$ 240,000 \\\hline\end{array}$
The company requires a $20 \%$ return on the investment in all products. The company uses the absorption costing approach to pricing.
- What is the markup percentage needed on Product S in order to achieve the company's required return on investment?

A) 29%.
B) 37%.
C) 40%.
D) 50%.